Run Government Like a Business? Not Likely!

 

Donald Trump suggests that we’d all be better off if Government were run like a business. Is he right? You decide.

 A blog by Bob Aronson

 In almost every political campaign someone will run on a platform of efficiency or, getting government to run more like a business. A lot of people maybe even a very strong majority of Americans believe that if our government ran more like a business our taxes would be lower, the money would be used more wisely, there would be far less bureaucracy, greatly diminished waste and mismanagement and we would all have more take-home pay in our wallets.

And – to be fair I guess that’s entirely possible. Who can argue with increased efficiency and wiser use of our tax dollars? To accomplish such a thing, however, would be no easy task simply because the founding fathers didn’t set up our government in a manner that allows it to be run like a business, not easily anyway and not without a whole lot of very serious adjustments. Let me offer this explanation. It is likely overly simple, but most businesses are either run by the CEO alone, or by a CEO and a board of directors. In either case there are few impediments to the orders of the leader being carried out. One might think a board of directors would be a good buffer, but most boards are made up of members selected by the CEO and often are rubber stamps for his or her authority.

Government, on the other hand, is set up to have a CEO (the President), but it is also structured to prevent the CEO from being a dictator. The Congress and the Supreme Court exist to offer necessary checks and balances to ensure that the separation of powers and the balance of power is intact. The three branches of government (Executive, Legislative and Courts) were included in the constitution to make sure that no one branch is dominant. History has proven that the system works pretty well even though it’s a far cry from perfect. By design our system is slow, cumbersome and frustrating and we’ve had no small number of horrible blunders, but then business has its share of blunders as well. Remember the Edsel and New Coke?

Business is not saddled with the separation of and balance of powers. There are not three equal branches in a business. The boss, or CEO pretty much calls all the shots, so they can operate in a more nimble manner, and implement decisions a whole lot faster. Ok, Ok… I know, sometimes corporations are incredibly slow to move, but that’s by choice or a lack of leadership, not by design). By the same token that lack of a buffer often results in the business, its employees, stockholders and customers being victimized by their owners or leaders. Here are just a few examples.

HealthSouth. Organized and directed by the company’s CEO, Richard Scrushy, this financial scam involved developing fictitious transactions and accounts to boost the company’s earnings. The fraud embezzled $1.4 billion, which was reported as the company’s earnings from 1996 to 2003. Where do you suppose the money went?

Tyco Ltd. In 2005 CEO Dennis Kozlowski and CFO Mark H. Swartz were found guilty of stealing $600 million from the company. These two symbolized the excesses of executive compensation at shareholder’s expense, where Kozlowski will be remembered for the $2 million birthday bash he gave his wife on a Mediterranean Island at the company’s expense.

Enron Corp. Enron was the epitome of wealth and power. The Houston-based energy company fell into a highly publicize bankruptcy due to a painstakingly-planned accounting fraud made by its accounting firm, Arthur Andersen. Enron shares dropped from $90 to $0.50. The result? Thousands of employees and investors saw their savings vanish

Arthur Andersen. Once one of the world’s top accounting firms, the Chicago company had to give up its licenses due to the Enron Fiasco. 85,000 jobs were lost.

I don’t know why people think of businesses as models of efficiency, but many if not most, do. Maybe it’s because there are so many good ones that leave one feeling secure, like Apple, 3M, Amazon, Disney, Starbucks and FedEx.

We conveniently forget about organizations like Enron, Health South, Bear Stearns, Tyco, Global Crossing and Arthur Anderson – all leading companies that were not only mismanaged, they were also heavily engaged in illegal activities. And – were it not for government watchdog agencies like the FDA, the FCC and the FTC there might be even more.

sinesses exist to turn a profit. That’s the only reason they exist. Yes, many also serve noble purposes as well but the real reason they exist is to make their leaders and shareholders wealthy. Furthermore, those who prefer small government, might consider that no business opens its doors with the intention of getting smaller. In order to make solid profits they must grow. The mindset of nearly every business executive is to drive profitability through growth. That’s a concept that flies in the face of those who are committed to small government.

Most importantly, though, if you are an advocate of running government like a business don’t forget that the people who run businesses are people, just like you and me and our elected officials and bureaucrats. Just because the country might be run by solid business principles is no reason to believe that it will be done with honesty and integrity and that the people of the United States will always be the corporation’s top concern. Especially in areas where billions if not trillions of dollars are at stake.

There are Bernie Madoffs, Richard Scrushys, Dennis Kozlowskis and Mark Swarts everywhere (all masters of swindling and misappropriation of funds). And even if we are somehow able to attract only the best and brightest business leaders to run government we will still get a few (I’m being kind by saying a few) of these swindlers and crooks who will take us all for a ride down the Bernie Madoff trail.

And, of course, we must also recognize that some of the best and brightest that business has to offer, just aren’t all that bright. Want proof? Ok, here’s just a small sample of corporate idiocy.

  • Tony Hayward CEO of British Petroleum, “The oil spill in the Gulf of Mexico is ‘relatively tiny’ compared with the ‘very big ocean’.” ( His tiny spill cost BP$40 billion)
  • President William Orton, Western UnionTelegraph Company when invited to buy the patent for the telephone for $100,000 wrote this to Alexander Graham Bell. “Mr. Bell, while it is a very interesting novelty, we believe it has no commercial possibilities. It is an electrical toy”
  • Robert Uihlein, CEO of Schlitz Brewing Company once in a pitched battle with Budweiser as the best-selling brew decided they could beat Uihlein found a way to cut brewing time by more than half by changing the formula. Almost immediately customers not only noticed a bad taste, worse yet, it broke down quickly to something that looked like mucous. Have you seen a Schlitz sign lately?
  • William Preece, Head of the British Post Office. “The Americans have need of the telephone, but we do not.  We have plenty of messenger boys.”
  • President of a Michigan Bank to Henry Ford’s lawyer. Don’t invest any money in Ford Motor Company. The horse is here to stay but the automobile is only a novelty – a fad.”

So, let’s consider every company’s commitment to profitability and growth. Do you really want police departments, fire departments, social service agencies and even the national weather service to be profitable? How about the Army, the Navy and the Air Force? To require those last three to be profitable might serve as an incentive to invade other nations and abscond with their treasuries. I think most people would agree that it sounds OK for a company to profit, it does not sound OK for a Government to do the same.

Certainly on the tactical level you might be able to install and execute some solid business practices. But when you get to congress and the Supreme Court chances of running government like a business die on the vine. You see Government really isn’t even set up to allow itself to be run like a business. The Constitution prevents that because of the three equal branches of government. Congress can stop anything the Executive branch chooses to do and even if congress and the Executive branch agree, the Supreme Court may tell them that what they want to do is illegal.

Corporations have boards of directors, not congresses and courts and – boards of directors are often appointed by the corporate CEO. Can you imagine a government where the President appointed members of congress? If there is anything that clearly defines the difference between government and business — that’s it. And – it can’t be changed without a constitutional amendment– actually several of them. It seems clear to me that if you despise totalitarianism you cannot really be for the concept of running government like a business because if allowed to properly evolve the corporate CEO could very easily proclaim himself King, order his minions in congress to approve the idea and then run the United States in the exact same manner as what caused our founders to leave Europe and come here in the first place. If our government had no checks and balances, no regulators and no opposition we would be in very deep trouble.

There is also a perception by many that Corporations attract much brighter people than Government because of the huge pay differences between the public and private sector. However, I think we all know that the amount of money one earns may have little or nothing to do with one’s intelligence or ability to make good, sound decisions.  Here are some examples of decisions made by some of the best and brightest from Government, business and the media.

“Television won’t be able to hold on to any market it captures after the first six months.  People will soon get tired of staring at a plywood box every night.” — Darryl Zanuck, 20th Century Fox.

“Nuclear powered vacuum cleaners will probably be a reality within 10 years.” — Alex Lewyt, President of the Lewyt Vacuum Cleaner Company in 1955.

“Before man reaches the moon, your mail will be delivered within hours from New York to Australia by guided missiles.  We stand on the threshold of rocket mail.” — Arthur Summerfield, U.S. Postmaster General in 1969

“There is practically no chance communications space satellites will be used to provide better telephone, telegraph, television or radio service inside the United States.” — T.A.M. Craven, Federal Communications Commission (FCC) commissioner 1961.

“Remote shopping, while entirely feasible, will flop.” — Time Magazine. Apparently Amazon never got that message.

“Cellular phones will absolutely not replace local wire systems.” — Famous inventor Marty Cooper in 1981

“I predict the Internet will soon go spectacularly supernova and in 1996 catastrophically collapse.” — Robert Metcalfe, founder of 3Com in 1995.

“There’s just not that many videos I want to watch.” — Steve Chen, CTO and co-founder of YouTube expressing concerns about his company’s long term viability in 2005

“Everyone’s always asking me when Apple will come out with a cell phone.  My answer is, ‘Probably never.’” — David Pogue, The New York Times, 2006

“There’s no chance that the iPhone is going to get any significant market share.” — Steve Ballmer, Microsoft CEO 2007

“With over 50 foreign cars already on sale here, the Japanese auto industry isn’t likely to carve out a big slice of the U.S. market.” Business Week on the failure of Japanese cars in the U.S.

“We don’t like their sound, and guitar music is on the way out,” said Decca Records about The Beatles in 1962.

“Children just aren’t interested in witches and wizards anymore,” an anonymous publishing executive told J.K. Rowling in 1996.

“The world potential market for copying machines is 5,000, at most,” said IBM to Xerox in 1959.

So there you have my thinking about whether running Government like a business is a good idea. You might be able to run some parts of government more efficiently using sound business principals and no one should object to that, but to do so on a Macro scale seems to me to be an undertaking that is destined for failure. The elected politicians will never let it happen. And…they may be right.

Post script. I purposely left out running a business like a non-profit organization because they are really quite similar to corporations, they just don’t use the word “Profit.” Instead their goal is to generate “Excess Revenue.”  Yes, it’s a euphemism but the law requires it. If they generate enough of that excess revenue they can enhance services and also make sure that people, especially at the top, are well paid.

Most non-profits have boards of directors much like corporations although some of them seem to me to be much too large. Those boards are also appointed by the CEO, but seem to be more independent than their corporate cousins.

I guess the non-profit type of corporate governance might be more practical than the business model for government, but it would still take a long time to accomplish and there would be some very painful changes.

Maybe rather than change to something new, we ought to just fix what we have. What do you think?

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